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London house prices could fall


House prices in London could be set to fall over the next three months, according to a poll by the Royal Institution of Chartered Surveyors (Rics).

The poll found that London surveyors believed house prices were likely to fall in the coming months, with one cause believed to be the recent introduction of tougher mortgage lending rules for borrowers.

Rics said that various factors, such as the tougher lending rules, have led to 30% of surveyors in London reporting a fall in demand over the last month.

The new rules in question were introduced as a result of the Mortgage Market Review, and they mean that all potential homeowner’s finances need to pass a strict ‘stress test’ before a lender can approve a mortgage.

Simon Rubinsohn, chief economist at Rics said: “Buyer enquiries in the capital are now slipping back, which suggests that the very sharp upward move in prices will flatten over the coming months”.

However, despite the expected fall of London house prices over the next three months, prices in the capital are still expected to increase over the next year.

“Subtle, rather than dramatic”

There have been various measures brought in by the Bank of England in recent months, which were designed to cool the housing market, and even more measures are set to come into effect in the near future.

As of October, borrowers will have to pass even stricter regulations for a mortgage to be approved, as they will need to prove they could comfortably afford their mortgage repayments in the event of a 3% increase on interest rates.

Additionally, mortgage lenders such as banks and building societies will soon face tougher restrictions on how many “risky” mortgages they can approve, as only 15% of their customers will be able to lend over 4.5 times than their current annual income.

However, whilst the MMR has had a “subtle, rather than dramatic” effect on the housing market, Rics said that the pending regulations are “unlikely on its own to have an immediate influence on the market”.

Instead, they believe that the recent talk about interest rate rises will be more significant than any of the upcoming changes to regulations.

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